Winterize Your Retirement Portfolio

To Help Avoid Icy Conditions, Rebalance Your Investment Allocation On A Regular Basis

Over time, frosty market flurries and chilly economic winds (or simply just the passage of time) can cause your investment allocation to drift a bit. This can leave you with a more conservative target investment allocation than what you originally selected and are comfortable with. Because your portfolio is exposed to the elements, it’s a good idea to rebalance your investments on a regular basis.

 Taking the Temperature: An Example

Investment Option	Original Investment Allocation Chosen	Current Investment Allocation After Market Downsizing	Investment Allocation After Rebalancing
Stock Fund	60%	50%	60%
Bond Fund	30%	35%	30%
Money Market Fund	10%	15%	10%

Let’s say that last quarter there was a stock market downswing and your original investment allocation of 60% in stock funds has now decreased to 50%. Meanwhile, your intended investment allocation to bond and money market funds has now increased. The current overall investment allocation no longer matches your original strategy. 

What You Need To Do

If you’re invested in a target date fund, the fund manager automatically rebalances your investment allocations for you. If not, you’ll have to take an active role in rebalancing your investments.

In the previous example, that means going into your account and selling off 5% each of your bond and money market fund investments and reallocating those funds back into your stock fund investments so they are aligned again with your chosen percentages. You can easily do this via your online account through your recordkeeper, or ask a customer service representative to assist you. In addition, many 401(k) recordkeepers offer an automatic rebalancing service (with a selection of timing options available, such as quarterly, semiannually or annually). 

And in the case of an extended increase in stock fund prices, you might find that your portfolio is riskier than you intended (such as a greater percentage of your portfolio is now weighted in stock funds). To get back to your target allocation, you would need to sell off part of your stock fund investments and reallocate appropriately to your bond and money market fund investments.

Raise Your Savings Temperature

One way you might save money to add to your retirement plan is to ask your local electric or gas utility for a free or low-cost home energy audit. The audit may reveal inexpensive ways to reduce home heating and cooling costs by hundreds of dollars a year. Keep in mind that a payback period of less than three years, or even five years, can save you lots of money

in the long term.

Informational Sources: Sofi: “How to Rebalance Your 401(k)” (August 25, 2023);

Americasaves.org: “54 Ways to Save Money”

This information is not intended as authoritative guidance or tax or legal advice. You should consult with your attorney or tax advisor for guidance on your specific situation.

Kmotion, Inc., 12336 SE Scherrer Street, Happy Valley, OR 97086; 877-306-5055; www.kmotion.com

© 2023 Kmotion, Inc. This newsletter is a publication of Kmotion, Inc., whose role is solely that of publisher. The articles and opinions in this publication are for general information only and are not intended to provide tax or legal advice or recommendations for any particular situation or type of retirement plan. Nothing in this publication should be construed as legal or tax guidance, nor as the sole authority on any regulation, law or ruling as it applies to a specific plan or situation. Plan sponsors should consult the plan’s legal counsel or tax advisor for advice regarding plan-specific issues.